Medicare Trustees issued their annual report on Medicare's financial status on April 23, 2012. According to this year's report, the Hospital Insurance (Part A) Trust Fund has sufficient reserves to pay out the full amount of Medicare Part A benefits until 2024 – the same projection made in last year's report. Should nothing else change, and the Trust Fund reserves be depleted in 2024, the Trust Fund would still receive sufficient income from the payroll taxes and other revenue through which it is funded to pay 87% of anticipated Part A expenses.[1]

As described in previous Alerts, the Trust Fund is a victim of the economy.[2] Health care costs typically rise at a much faster rate than general inflation. This, combined with a high unemployment rate which means that fewer people are working and contributing payroll taxes into the Trust Fund, leads to the changes in the projected solvency of the Trust Fund. Since 1970, the trustees have projected Trust Fund insolvency in as little as 4 years or as much as 28 years.[3] The longest projected solvency period occurred in years in which the country experienced high economic growth and budget surpluses.

In short, contrary to assertions made by some, Medicare is not going "bankrupt" or running out of funds.[4]Medicare does, however, face funding challenges. While changes to the Medicare program pursuant to the Affordable Care Act (ACA) have improved Medicare's cost outlook by extending trust fund solvency by 8 years,[5] more needs to be done to bring down program costs.[6]